What to Expect When PokerStars Returns to the US
PokerStars expected return to the United States is a really big deal.
That being said, I am worried that far too many people are putting too much pressure on PokerStars, while at the same time others are selling them short. My personal expectation is somewhere in between the “just another site” crowd and the “utter market domination” crowd, although I lean towards utter domination.
The world’s largest online poker room (by a mile) has earned the respect of their customers thanks to their software, their promotions, their player rewards program, their customer support, and their track record of doing the right thing by their players.
The company is simply a well run, professional, outfit.
So, it’s really no surprise that New Jersey online poker players are looking at PokerStars return with…
Exuberance
When PokerStars does return to the U.S. I fully expect to see them almost instantaneously overtake their competitors as the #1 online poker provider in the market.
PokerStars has a strong brand in the poker world and their past (warts and all) will actually play a somewhat beneficial role in my view, as they will certainly grab headlines in just about every local paper from the time the DGE approves their license to the time they launch —The past three or four years is almost like free advertising for PokerStars.
I’d also wager a lot of money that PokerStars will make sure they are the at the top of the heap by doing the following:
- Their VIP Program will be the best in the industry
- They will run the largest guaranteed tournaments
- They will have the best promotions
- They will out-market their competitors
- They will make sure they have the best customer service
Make no mistake about it, PokerStars is going to come into New Jersey like gangbusters.
Outside of New Jersey, in the global market, they already have the best product —over 50% of online poker players aren’t playing at PokerStars because they like the logo.
Furthermore, despite what some lawmakers and certain casino magnates might think, inside the online poker community PokerStars has, hands down, the best reputation.
That being said, when you do jump ship and sign up at PokerStars the moment they launch expect some…
Disappointment
For all the people who are under the impression that PokerStars is going to cruise into New Jersey, dominate the market, and rescue a flailing (their words not mine) industry with their superior software, superior promotions, and superior customer service remember this: We are no longer living in 2010.
PokerStars (now owned by a publicly traded company and therefore beholden to their shareholders to turn a profit) will be under the same restrictions as everyone else in the New Jersey iGaming market, and by this I mean they will have to pay licensing fees and taxes, and more importantly, abide by the regulations that are in place.
Here are three such things that PokerStars didn’t have to deal with pre-Black Friday:
- Your affiliates must be licensed, and there aren’t an awful lot that are in New Jersey.
The affiliate industry in the legal U.S. markets is one of the most underreported and unknown changes in the online poker world. You can no longer create a website, contact PokerStars, pass a basic litmus test, and start sending players to Stars for a commission.
Affiliates are fewer and farther between in New Jersey, so unlike in 2010 it will be a bit more difficult to just blast your brand across the Internet.
- Every aspect of your software must be checked by the Division of Gaming Enforcement.
This is another underreported factor in the U.S. online gaming industry, and it explains why partypoker and 888 are using stripped-down versions of their global software in New Jersey. For everyone complaining about missing features and the “2005 software,” it’s not that these companies don’t possess better, it’s that they haven’t been fully approved by regulators and they are unable to unleash it.
Basically the DGE has yet to sign off on basic functions of online poker software such as waiting lists.
Chances are, PokerStars is going to run into these same problems.
- The market simply doesn’t exist to justify spending huge amounts of money.
Yes, PokerStars has the money and the team in place to market to the nines, but are they going to spend millions and millions of dollars every month to gain control of a market that is currently worth about $25 million a year in its totality?
Even if you are the constant optimist, and you feel the NJ online poker market could be worth $50 million when its mature, this is still a drop in the bucket when you consider marketing costs, taxes (a robust 15%), operating costs, and so on.
Right off the top 15% of PokerStars earnings will go to New Jersey, another significant percentage will be handed over to their partner, Resorts Casino, and then after subtracting their operating costs they will see what they have left over for marketing.
A privately owned PokerStars might be able to bite this bullet for a longer period of time, but it would be hard to explain to the board of directors why your monthly marketing bill is $2 million when monthly revenue for the entire NJ online poker industry was $2.1 million in July —pre-tax.
The bottom line is this: It’s fine to be excited and view the return of PokerStars as a major step forward for the U.S. online poker industry (which it is) but don’t build up the company to the point where their launch is destined to be a disappointment.
I’d also add, that if you apply these issues (DGE software approval, taxes, and the small market) perhaps you’re being too hard on the operators already in the market as well.
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